The number of households that they are struggling to make ends meet each month has risen by more than 800,000 compared to a year ago, research shows.

The soaring cost of living has left an estimated 3.5million households without enough income to cover all their bills every month - a rise of 30 per cent from 2.7million last year, according to a report from Legal & General.

The figure is now equivalent to almost a fifth (18 per cent) of all households compared to one in 8 just a year ago, adding weight to Labour leader Ed Miliband’s claim that Britain is facing a cost of living crisis despite the recovery in economic growth.

Dramatic rise: The number of families saying they can't afford to make ends meet has risen by 800,000 to almost one in five households in the past twelve months

It is the second blow in as many days to hopes that household finances were recovering along the same lines as the wider UK economy.

A report yesterday from financial information firm Markit claimed four times as many families, 29 per cent, said their finances had deteriorated during November compared with the seven per cent who have seen an improvement.

It could spell trouble for the UK's already struggling high streets in the run up to Christmas, with the survey indicating the weakest consumer appetite for major purchases recorded so far this year.

Markit's Tim Moore suggested that a recent string of price hikes announced by energy companies have dampened households' perceptions amid more positive news recently as sentiment about job security reached a new high this month.

Markit found that 42 per cent of the 1,500 households surveyed predict their finances will have worsened in a year's time, with just 24 per cent expecting to see an improvement.

The figures come a week after the Bank of England revised its forecast for economic growth for this year and next to 1.6 per cent and 2.8 per cent respectively. Official figures also showed that consumer price inflation fell by more than expected from 2.7 per cent in September to 2.2 per cent last month.

Crisis: The number of households that say they can't pay all their bills each month has risen to 3.5million, L&G said

But with average energy bills rising by an inflation busting 9 per cent this winter, the cost of train travel to rise in January by a similar amount and wages rises all but stagnant, the number of financially stable households is likely to fall further L&G said.

It said the rising cost of fuel was likely to wipe out any benefits from falling prices for other goods and make balancing household finance even harder, especially for those with lower incomes.

It added that with one in three (34 per cent) households already saying they are in fuel poverty the amount spent on fuel is also likely to have a significant impact on how less well-off households cope with paying bills over the coming months.

Regionally, the East Midlands - where the number of households in financial crisis has almost quadrupled in the past year - and London have been the most affected. A quarter of all households in both regions now say they are struggling to make ends meet. Elsewhere, the number of households in financial crisis has almost doubled in the North East, Scotland and Yorkshire and the Humber since October 2012.

The figures also suggest the cost of living crisis is spreading with seven out of the 11 regions surveyed showing the number of households struggling to make ends meet has risen significantly.

The South East, East Anglia and Wales appear to have been the main beneficiaries of the economic recovery with the number of struggling households has fallen since last year.

The number of households that describe their finances as stable - those households that say they have money left over after paying debts and bills - has fallen 4 per cent in the last year to just two fifths.

Spreading: The number of households in financial crisis is spreading across almost all regions of Britain, L&G added

Meanwhile, those households that say the are just surviving - defined as meeting their monthly obligations but having nothing left over - fell from 44 per cent of the total to 42 per cent.

John Pollock, chief executive of Legal & General Assurance Society said; ‘The reality of the UK today is that people are worse off despite the recovery in the economy, falling unemployment and lower inflation.

‘The fact that household finances have taken a downturn over the last year is reflected in our MoneyMood survey. Not only are we seeing that over 800,000 more households are struggling to make ends meet compared with last year, but our latest research shows a fall in the number of homes who can afford to save compared to a year ago.

‘Falling unemployment and lower inflation figures for October are welcome news but do not appear to be feeding through to stronger household finances.’

Household finances have worsened at a much faster pace than the previous month (Source: Markit)